Cooperative Purchasing: Alive and Well in the States

Cooperative Purchasing: Alive and Well in the States

The possible opening up of the General Services Administration's schedules to state and local governments has created quite a stir during the past year. Now that Congress is in the process of repealing the provision that would allow GSA to take such action, many believe cooperative purchasing is dead. But they couldn't be more wrong.

Cooperative purchasing of information technology is one of the hottest areas of state and local government purchasing and is expected to get even hotter in the future. The impending action by Congress simply leaves GSA out of the cooperative purchasing picture, at least for the short-term. State and local governments, and possibly even some federal departments, are still in the game.

One of the largest areas of cooperative purchasing in government is between state governments and other nonstate governmental or quasi-governmental buyers within the states. The latter include school districts, counties, cities, townships, special districts such as transportation authorities, not-for-profit organizations such as hospitals and, in some cases, even small businesses. More states are expanding their statewide term contracts for information technology products and services, which often resemble GSA-type schedules, to allow for purchasing by nonstate and quasi-governmental buyers. These cooperative agreements support the statewide purchasing of PCs, peripherals, servers, software, professional services and telecommunications services.

Over time these contract vehicles are creating significant new opportunities for cooperative purchasing. For example, in 1996, local governments in Texas purchased more than $600 million in technology products and services from the state's information technology catalog. Missouri's new prime vendor contract permits local governments to purchase information technology products and services.

Cooperative agreements are often not limited to buyers within the states. States are increasingly interested in developing cooperative agreements that extend across state boundaries. Many interstate agreements are for specific areas of need. Many electronic benefits transfer systems that support issuing food stamp benefits were jointly procured by regional alliances of states: the Northeast Coalition, consisting of the New England states and New York; the Southeast Alliance, a consortium of most of the southern states; Minnesota and Wisconsin; and several states within the Western Governors' Association.

Many local governments simply do not have the purchasing expertise, nor buying power, to support their requirements. Having to truly live within balanced budgets, and faced with many other critical needs, they are leveraging skills, experience and investments made by other governments.

One way to gain leverage and expertise is to form a cooperative purchasing group that goes to the market as a single buying entity. The New York Division of Criminal Justice Services and the Division of Probation and Correctional Alternatives, for example, are jointly working on a project to implement probation management information systems in all New York state counties. Alone, many of the counties could not afford to implement this system, but by cooperating they expect to lower their overall costs. Another benefit of cooperation will be the development of a standard system for probation systems in the state.

Maryland recently took a similar approach to cooperation when the state worked with local governments to purchase a register of wills system for 23 counties and Baltimore city.

Other more unusual cooperative purchases between states have occurred. Sometimes these involve a national trade association that works in concert with the states. More than 30 state unclaimed property offices are jointly planning to design and implement a single nationwide database for information on unclaimed property. The procurement is being handled by the National Association of Unclaimed Property Administrators on behalf of the participating states. Public Technology Inc., a nonprofit corporation created jointly by municipal and county governments, has undertaken similar initiatives on behalf of local governments.

Once state and local governments begin aggregating their purchasing power in response to common needs, the economic value of the procurements can quickly escalate. The County of Los Angeles recently solicited proposals for brand name computer equipment, peripherals, software and services. The solicitation allowed the awardees to offer their products and services to the National Association of Counties and Fairfax County in addition to Los Angeles County. The estimated contract value for Los Angeles alone was over $30 million. If all California counties were included this would add another $30 million annually. And if all counties - over 3,000 nationally - were included, the value could increase by $90 million.

Because of the increasing cost and complexity of technology, as well as the growing flexibility of procurement laws within state and local governments, the use of innovative cooperative purchasing agreements will grow exponentially in the future.

These cooperative agreements allow state and local governments to lower overall technology costs, avoid unnecessary duplication and redundancy, create shared information technology solutions and gain market visibility for their needs.

Cooperative purchasing in the states is just now coming into its own. Even with GSA watching from the sidelines, cooperative purchasing has a promising future.

Thomas R. Davies is vice president of Federal Sources state and local government consulting practice in McLean, Va. He can be reached at daviest@fedsources.com. Dave DeBrandt contributed to this article.